European Markets Drop 1.9%, Missing EgyptApir Plane Weigh on Sentiment

Lucy Stoeva
19 May, 2016
New York City

Stocks in Europe traded sharply lower after a missing EgyptAir plane dragged down shares of travel companies. The prospects of a U.S rate hike and a stronger dollar weighed on resource stocks. Thomas Cook plunged 18% on a lower full-year outlook.

[R]4:00 PM Frankfurt, Germany – Stocks in Europe traded sharply lower after a missing EgyptAir plane dragged down shares of travel companies. The prospects of a U.S rate hike and a stronger dollar weighed on resource stocks. Thomas Cook fell 18% on a lower full-year outlook.[/R]

Stocks in Europe traded sharply lower after a missing EgyptAir plane dragged down shares of travel-related companies, while the prospects of a U.S rate hike and a stronger dollar weighed on mining and energy shares.

Travel operators and airlines retreated after Egyptair flight with 66 passengers on board disappeared over the Mediterranean Sea on a flight from Paris, France to Cairo, Egypt this morning.

Thomas Cook led the decline with a plunge of 18%, as the company also lowered its outlook for the year.

InterContinental Hotels tumbled 3.5%, TUI AG lost 2.4%, International Consolidated Airlines Group dropped 1.9%, and EasyJet gave up 1.5%.

Minutes from the Federal Reserve’s meeting in April indicated that most of the policymakers would support a rate hike in June, if the U.S. economy continued to improve.

The dollar rose 0.11% against the euro to €0.8925, dragging lower the prices of basic metals and crude oil.

Brent crude oil futures tumbled 2.3% to $47.82 per barrel, while WTI crude oil futures dropped 2.1% to $47.18 per barrel.

Among energy stocks, Tullow Oil fell 8.1%, Seadrill plummeted 14.3%, and Royal Dutch Shell erased 4.8%.

Mining companies were among the greatest losers, with Fresnillo down 7.8%, Anglo American losing 7%, and BHP Billiton shedding 5.1%.

On the positive size, bank stocks gained on the prospects for a rate increase as the low-rate environment hurts the profitability of the sector.

In Germany, Deutsche Bank rose 1.3%, while in London, the Royal Bank of Scotland advanced 1.5%. Italian Intesa Sanpaolo added 2.1%

In London, the FTSE 100 index dropped 111.94, or 1.82%, to 6,053.86, headed towards a two-month low.

In Frankfurt, the DAX index lost 137.48, or 1.38%, to 9,805.75 while in Paris, the CAC 40 index fell 39.68, or 0.92%, to 4,279.62.

Merck KGaA jumped 4.3% to €86.10 after the German conglomerate reported better-than-expected first-quarter profit, helped by the acquisition of pharmaceutical equipment company Sigma-Aldrich Corp.

Operating earnings, excluding one-time costs, soared 27% to €1.1 billion. The company confirmed expectations for sales of €14.8 billion to €15 billion in 2016.

Merck bought Sigma-Aldrich for $17 billion and AZ Electronic Materials SA for $2.6 billion last year. It had also signed a $2 billion collaboration agreement with Pfizer Inc. to develop a new cancer therapy.

Royal Mail Plc fell 3.8% to 488 pence after the U.K. postal service reported a sharp drop in profit and warned that the market remains challenging.

Revenue rose 1% to £9.2 billion in fiscal 2016 from the previous year, as growth in the European division helped to offset a decline in the U.K.

Annual pre-tax profit plunged 33% to £267 million from the previous year, while adjusted annual operating profits before transformation costs rose 5% to £742 million.

Transformation costs included 3,500 voluntary redundancies and other costs for a total of £191 million in fiscal 2016.

Thomas Cook Group Plc tumbled 18.8% to 72.75 pence, a four-year low, after the U.K. holiday company lowered its full-year outlook.

Summer bookings were down 5% from the previous year as tourists were avoiding Turkey, one of its most popular destinations, on safety concerns.

Demand for travel to Belgium also fell sharply after the terrorist attacks in Brussels.

Revenues for the six months ended March 31 fell to £2.67 billion, down from £2.74 billion last year.

Pre-tax loss slightly improved to £288 million from £303 million last year as Thomas Cook moved towards higher quality holidays with better margins.

3i Group Plc gained 2.6% to 500 pence after the investment manager said assets under management increased 3.9% during fiscal 2016, which ended in March.

The company also announced that it has authorized a bond purchase program for 5.625% notes due march 17, 2017.

Full-year profit attributable to equity holders advanced to £817 million from £700 million last year. Earnings per share rose to 85.2 pence from 72.9 pence a year ago.

Net asset value jumped 17% to 463 pence per share.